The Power of a Financially Literate Woman
Date Written: September 14, 2020
Using broad cross-sectional information from Indian households, we find that women who are financially literate take on higher levels of responsibility in managing their households’ finances, as compared to financially literate men. By jointly modeling the responsibility levels with ownership decisions, we observe that financial literacy has a positive relationship with increased responsibility levels within households for women and this in turn translates into higher probabilities of owning financial products. The evidence is observed when we study the ownership status for eighteen different financial products from six different product market segments. We also observe lower probabilities of engaging in informal banking activities such as saving informally and borrowing from moneylenders for financially literate households. The marginal benefit of financial literacy for women is seen to be greater for the privileged caste, while it decreases going down the caste hierarchy to lower caste households, where women face tacit restrictions on participating in the economic affairs of the household. The results highlight the importance of financial literacy in empowering women in decision-making and reducing social disparity.
Keywords: gender equality, gender gap, household decision-making, financial responsibility, financial literacy, caste, financial holdings
JEL Classification: J16, J15, D14, O16
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